US Wheat Review on Friday: Rises on short-covering, technical buying

 

 

Short-covering and technical buying carried U.S. wheat futures to double-digit gains Friday, even though rallies in the neighboring corn and soybean markets petered out.

 

Chicago Board of Trade March wheat climbed 16 cents to US$5.82 3/4 per bushel. Kansas City Board of Trade March wheat rose 12 1/2 cents at US$6.10 1/2, and Minneapolis Grain Exchange March wheat closed up 9 1/4 cents at US$6.60 3/4.

 

Support came from speculative funds, which are net short in CBOT wheat, traders said. Buy stops were triggered as prices rose, accelerating the rally, they said.

 

"What the funds are doing is they're starting to get out of those short positions," said Tim Hannagan, analyst for Alaron.

 

There was a lack of fresh fundamental news to support the surge, traders said. Weekly U.S. wheat export sales of 413,300 tonnes were within trade expectations, which ranged from 200,000 to 500,000 tonnes, but nothing to get too excited about, they said.

 

A breakdown of the weekly sales by class showed soft red winter wheat sales of 4,600 tonnes, which were "horrible," a trader said. SRW wheat, traded at the CBOT, is used to make pastries and snack foods.

 

"It's more mechanical than anything," Hannagan said about Friday's rally. "There isn't anything that's happened to wheat."

 

Gains in CBOT soybeans and corn added support to wheat during the session, but the neighboring markets ran out of steam ahead of the close, traders said. March corn closed up 3 cents, while March soybeans close down 3 cents.

 

Wheat will take direction from the neighboring markets and from weather in Argentina when traders return Monday, Hannagan said. Dryness in South America has supported soybeans and corn lately, but there will be a sell-off if weekend rains in Argentina are heavier than expected, he said.

 

 

Kansas City Board of Trade

 

The breakdown of the weekly U.S. wheat sales by class showed hard red winter wheat sales of 158,900 tonnes. However, private exporters separately reported cancellations of 356,000 metric tonnes HRW wheat for delivery to Nigeria.

 

In other news, analysts continued to watch weather in the U.S. Plains, where some hard red winter wheat areas are dry. However, spring rains can still make or break the crop, traders said.

 

It appears the southern Plains won't see "any major upturn in precipitation as spring approaches," Cropcast Agricultural Weather said in a forecast. Still, forecast models showed light precipitation activity developing during next one to five days, the private weather firm said.

 

"While a wetter period would not wipe out longer-term dryness, it would certainly be welcome considering the mostly dry seasonal outlook," Cropcast said.

 

 

Minneapolis Grain Exchange

 

MGE wheat futures closed higher but lagged behind the CBOT and KCBT. Speculative money plays more in Chicago and Kansas City than in Minneapolis, a trader said.

 

Sales of hard red spring wheat for delivery in the 2008-09 marketing year were 178,500 tonnes, according to the USDA. Sales for the 2009-10 marketing year, which begins June 1, were 3,000 tonnes.